From the BLS February report, looks like annual wage increase numbers are at 2.1% and total inflation numbers at 4.0% [both Feb to Feb].

Two of the things that brought February's inflation numbers down was women's retail sales markdowns and non alcoholic beverages [???] So, it seems that you can get good discounts of women's underwear and diet coke at this point in time.

Little by little, millions of Americans surrendered equity in their homes in recent years. Lulled by good times, they borrowed — sometimes heavily — against the roofs over their heads.

Now the bill is coming due. As the housing market spirals downward, home equity loans, which turn home sweet home into cash sweet cash, are becoming the next flash point in the mortgage crisis.

Americans owe a staggering $1.1 trillion on home equity loans — and banks are increasingly worried they may not get some of that money back.

To get it, many lenders are taking the extraordinary step of preventing some people from selling their homes or refinancing their mortgages unless they pay off all or part of their home equity loans first. In the past, when home prices were not falling, lenders did not resort to these measures.

Such tactics are impeding efforts by policy makers to help struggling homeowners get easier terms on their mortgages and stem the rising tide of foreclosures. But at a time when each day seems to bring more bad news for the financial industry, lenders defend the hard-nosed maneuvers as a way to keep their own losses from deepening.

It is a remarkable turnabout for the many Americans who have come to regard a home as an A.T.M. with three bedrooms and 1.5 baths. When times were good, they borrowed against their homes to pay for all sorts of things, from new cars to college educations to a home theater.

Lenders also encouraged many aspiring homeowners to take out not one but two mortgages simultaneously — ordinary ones plus “piggyback” loans — to avoid putting any cash down.

The result is a nation that only half-owns its homes. While homeownership climbed to record heights in recent years, home equity — the value of the properties minus the mortgages against them — has fallen below 50 percent for the first time, according to the Federal Reserve.

Lenders holding first mortgages get first dibs on borrowers’ cash or on the homes should people fall behind on their payments. Banks that made home equity loans are second in line. This arrangement sometimes pits one lender against another.

When borrowers default on their mortgages, lenders foreclose and sell the homes to recoup their money. But when homes sell for less than the value of their mortgages and home equity loans — a situation known as a short sale — lenders with first liens must be compensated fully before holders of second or third liens get a dime.

In places like California, Nevada, Arizona and Florida, where home prices have fallen significantly, second-lien holders can be left with little or nothing once first mortgages are paid.

In December, 5.7 percent of home equity lines of credit were delinquent or in default, up from 4.5 percent in 2006, according to Moody’s Economy.com.

Lenders and investors who hold home equity loans are not giving up easily, however. Instead, they are opposing short sales. And some banks holding second liens are also opposing refinancings for first mortgages, a little-used power they have under the law, in an effort to force borrowers to pay down their loans.

“Acknowledging a loss is the most difficult thing to do,” said Micheal Thompson, the executive director of the Iowa Mediation Service, which has been working with delinquent borrowers and lenders. “You have to deal with the reality of what you are facing today.”

While he has been able to strike some deals, Mr. Thompson said that many mortgage companies he talks with refuse to compromise. Holders of second mortgages often agree to short sales and other changes only if first-lien holders pay them a small sum, say $10,000, or 10 percent, on a $100,000 debt.

Disagreements arise when the first and second liens are held by different banks or investors. If one lender holds both debts, it is in their interest to find a solution.

When deals cannot be worked out, second-lien holders can pursue the outstanding balance even after foreclosure, sometimes through collection agencies. The soured home equity debts can linger on credit records and make it harder for people to borrow in the future.

Experts say it is in everyone’s interest to settle these loans, but doing so is not always easy. Consider Randy and Dawn McLain of Phoenix. The couple decided to sell their home after falling behind on their first mortgage from Chase and a home equity line of credit from CitiFinancial last year, after Randy McLain retired because of a back injury. The couple owed $370,000 in total.

After three months, the couple found a buyer willing to pay about $300,000 for their home — a figure representing an 18 percent decline in the value of their home since January 2007, when they took out their home equity credit line. (Single-family home prices in Phoenix have fallen about 18 percent since the summer of 2006, according to the Standard & Poor’s Case-Shiller index.)

CitiFinancial, which was owed $95,500, rejected the offer because it would have paid off the first mortgage in full but would have left it with a mere $1,000, after fees and closing costs, on the credit line. The real estate agents who worked on the sale say that deal is still better than the one the lender would get if the home was foreclosed on and sold at an auction in a few months.

“If it goes into foreclosure, which it is very likely to do anyway, you wouldn’t get anything,” said J. D. Dougherty, a real estate agent who represented the buyer on the transaction.

Mark Rodgers, a spokesman for CitiFinancial, declined to comment on the McLains’ situation, citing privacy considerations.

“We strive to find solutions that are acceptable to the various parties involved,” he said but two lenders can “value the property differently.”

Other lenders like National City, the bank based in Cleveland, have blocked homeowners from refinancing first mortgages unless the borrowers pay off the second lien held by the bank first. But such tactics carry significant risk, said Michael Youngblood, a portfolio manager and analyst at Friedman, Billings, Ramsey, the securities firm. “It might also impel the borrower to file for bankruptcy,” and a judge could write down the value of the second mortgage, he said.

A spokeswoman for National City, Kristen Baird Adams, said the policy applied only to home equity loans originated by mortgage brokers.

Underscoring the difficulties likely to arise from home equity loans, a Democratic proposal in Congress to refinance troubled mortgages and provide them with government backing specifically excludes second liens. Lenders holding a second lien would be required to write off their debts before the first loan could be refinanced. That could leave out a significant number of loans, analysts say.

People with weak, or subprime, credit could be hurt the most. More than a third of all subprime loans made in 2006 had associated second-lien debt, up from 17 percent in 2000, according to Credit Suisse. And many people added second loans after taking out first mortgages, so it is impossible to say for certain how many homeowners have multiple liens on their properties.

“This is turning out to be a real impediment to solving this problem,” said Mark Zandi, chief economist at Economy.com, “at least, solving it quickly.”

The market has been hovering at 12,200 for the past 3 months. Q1 reports are going to start in a week. IF all the negatives are factored to the 12,200 number in we might get a pop for the stock market. That will be good for those that invest in the stock market.

That is still not going to deal with some underlying issues but it will be good news for those of us who can afford the market and have 401Ks or other instruments tied to it.

McBear, Kentucky

Being smart is knowing the difference, in a sticky situation between a well delivered anecdote and a well delivered antidote - bear.

Why is the crisis clearly more severe this time than ever before, and why are remedies that worked relatively quickly in the past (remember the fast turnaround of the market after October 1987, and the rapid recovery from the rescue of Long Term Capital Management?) failing today?

The answer is, simply, that the world has never in its history carried the level of debt that it is carrying today. The remedies that worked when America’s private debt to GDP ratio was a mere 150&#37; are inadequate when that ratio is 275%.

Those remedies worked in the past, not because they “solved the problem,” but because they encouraged the renewal of the debt accumulation process. Each Federal Reserve rescue was followed by a renewed growth of debt relative to income–without which, the economy would have gone into a slump, rather than a boom.

The traditional cure to a financial crisis – to restart the debt accumulation engine – can’t work this time, because in America today, there’s no one left to lend to (there is no sub-subprime borrower), and no lender willing to risk its capital in yet more debt.

So the real fun on the markets will begin in three months' time, when the credit extended by the expansion of the liquidity window by the Fed has to be repaid.

-Minyan R.

MR,

Most Minyans have seen this chart before. Even though it illustrates the magnitude of the amount of debt in the system, it's wrong. The chart doesn't include a new phenomenon, one that has taken place just over the last five years. The total debt figure doesn't include the debt of the “shadow banking system,” which is debt embedded in derivatives like securitized loans and credit default swaps (CDS).

If you include that debt the current number is probably more like six times total debt relative to GDP. This compares to two times just ten years ago. The numbers could be even worse based on how manipulated current GDP numbers are. When Bear Stearns (BSC) almost went under the real problem was the CDS contracts it had swapped with other banks: all this debt is tied together in a web where if one strand breaks the whole web could collapse.

This is why bureaucrats are doing crazy things and why the solutions so far have not worked: it's not a liquidity problem where more debt will solve things. It's a solvency problem due to too much debt.

Not until total debt comes down to a realistic number can a real recovery take place. If debt is to be destroyed to that magnitude the deflation will be monstrous. No doubt the U.S. government will certainly nationalize or monetize or socialize this debt in a trust that will bilk taxpayers over time. All the Fed's doing by pumping Term Auction Facility (TAF) and guaranteeing debt is keeping the monster from suffocating immediately.

When the government does announce a $1 trillion trust to buy mortgages it will be with our kids’ standard of living.

Until we get two quarters of down GDP "this recession" does not exist. No one can deny that we are in a slowdown in some sectors of the economy, but to continue to call it a recession is just more fear-mongering BS (Bear Shit)!

Put another way, the FED acted to PREVENT a recession, and I think they did just that.

The ONLY two items that have kept the GDP numbers from being negative [and therefore a "definition Recession"] for the past THREE Quarters are Energy and Food INFLATION. Everything else is already in Recession.

So, to clarify, the only things that keeps this country out of a "definition Recession" are TWO Sectors that are in double digit Inflation. Only a fool or politician will deny the fundamental correlation of those statistics.

McBear, Kentucky

Being smart is knowing the difference, in a sticky situation between a well delivered anecdote and a well delivered antidote - bear.

The market has been hovering at 12,200 for the past 3 months. Q1 reports are going to start in a week. IF all the negatives are factored to the 12,200 number in we might get a pop for the stock market. That will be good for those that invest in the stock market.

That is still not going to deal with some underlying issues but it will be good news for those of us who can afford the market and have 401Ks or other instruments tied to it.